The energy sector downturn led to lower second-quarter profit at Prosperity Bancshares in Houston, which continued to shrink the size of its book of oil and gas loans in response.
The $22 billion-asset company's net income fell 3.3% to $152.5 million. Earnings per share were 98 cents, a half-cent shy of the consensus among analysts surveyed by Bloomberg.
Net interest income after the loan-loss provision rose 0.1% to $158.5 million. Total loans rose 6% to $9.65 billion.
The loan-loss provision rose to $6 million from $500,000. Net chargeoffs rose to $5.9 million from $491,000, largely due to a single energy loan and an additional charge on an agricultural loan.
While problems with energy loans persist, Prosperity is reducing its exposure to the sector. Loans to oil and gas companies fell to $328 million or 3.4% of total loans, from $433 million or 4.8% of total loans.
"We believe that we have seen the bottom in oil prices and that the energy industry should start experiencing job recoveries by the first quarter of 2017," David Zalman, the chairman and chief executive of Prosperity, said in a news release.
Noninterest income fell 6% to $28.6 million on lower fees from bounced checks, trust income and brokerage income.
Noninterest expense fell 0.6% to $79.2 million on lower costs for regulatory assessments and Federal Deposit Insurance Corp. assessments and lower depreciation costs.